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Over the past few
years, mortgage regulations have changed significantly, making your options
greater than ever. Subtle changes in the way you approach your quest for a
mortgage, and small differences in the way you structure your mortgage can
potentially save you thousands of dollars. Whether you are about to buy your
first home, planning to move to a new home, or buy a second home, it is
important for you to properly inform yourself about all the factors involved.
Before you commit yourself to monthly mortgage payments, carefully consider the
following issues. Effective consideration of these issues can make your mortgage
payments work more efficiently for you.
Know Your Long Term Goals
You should
carefully and diligently consider your long term goals and expected situation
before determining the type of mortgage that will best suit your needs. There
are many questions you should ask yourself before committing to any mortgage,
here are a few to consider: How long do you plan to own the property? Will it
be your primary residence? Do you plan to rent the property? What direction are
interest rates going in, and how quickly? Is your income expected to change (up
or down) in the near term? How much money do you want to use towards your
mortgage?
Know Your Monthly Dollar Amount
Know your
limitations and comfort level and stick to it! It is important that you know
exactly what dollar amount you feel comfortable committing to pre-assess
for yourself, a mortgage payment and down payment that you are comfortable with
before beginning. Your situation may qualify you for an amount that is higher
than the amount of money you would want to pay each month. By working your
figures out, you can determine what home price this will equate to with the
current interest rates, thus you will not waste time looking at property which
is not in your price range. Don't get pushed around! All too often, real
estate agents will encourage buyers to purchase a home that caps the limits of
their mortgage qualification. If you have decided to ditch the agent, then you
will not have this pressure - congrats.
Understand your Credit Rating
You should consider
checking your credit proir to your mortgage shopping. Knowing that you have good
credit will certainly help you when applying for a mortgage. However, don't
despair if you have a few blemishes on your report, knowing ahead of time, is
the best way for you to fix them. Take the time to have a credit checkup before
meeting with mortgage brokers and lenders. This will help you avoid any
unpleasant surprises.
Get Preapproved
You can, and should
get preapproved for a mortgage before you go looking for a home. Preapproval is
easy, and can give you complete peace-of-mind when shopping for property. Any
lending institution can provide you with written preapproval for you at no cost
and no obligation, and it can be done quite easily over the Internet or the
phone. More than just a verbal preapproval from the lending institution, you
should receive a written preapproval, it's considered as good as money in the
bank. This will entail a complete credit application, and a certificate which
guarantees you a mortgage to the specified level when you find the home you're
looking for.
Understand the Prepayment Privileges (and Penalties)
Make sure you understand what prepayment
privileges and prepayment frequency options are available to you. More frequent
payments (such as weekly or biweekly) can shave years off your mortgage. Simply
structuring your payments so that they bill out more frequently, will
significantly lessen the amount of interest that you will pay over the term.
Prepaying a percentage of your mortgage, or increasing the amount you pay
monthly, will have a major impact on the length of your mortgage and can shorten
your payment term considerably, building equity in your property more quickly.
These two payment options can cut years off your mortgage and save you
thousands of dollars in interest. However, not every mortgage has these
prepayment privileges and some carry prepayment penalties, so make sure you ask
about these options prior to selecting a mortgage.
Inquire about Portable and/or Assumable Mortgages
Ask if your mortgage is both portable and/or
assumable. A portable mortgage, where available, is one that you can carry with
you when you buy your next home and avoid paying any discharge penalties. This
means that you will not have to go through the entire mortgage process again
unless you are making a move up to a much more expensive home. An assumable
mortgage is one that the buyer of your property can take over when you decide to
sell. This can be a very powerful tool at the negotiation table, making it much
easier and more desirable for a buyer to buy your property. This too saves on
discharge penalties.
One should consult with a
qualified mortgage professional prior to implementing any mortgage strategies. If you
are a real estate planning, insurance, tax or estate planning professional
receiving this newsletter, please call our office and introduce yourself to us.
We are always seeking to grow our referral network and expose more service
professionals to our client base. |
